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Gas share in total energy mix declines to 47.6 per cent

LAHORE – Though natural gas maintained its position of primary source of energy, its share in country’s total energy mix has gone down to 47.6 per cent from its peak of 50.3 per cent in FY05, experts said.

Natural gas has remained a primary source of energy since FY02 on account of its lower price and easy availability. However, in last couple of years the growth in gas production has been meagre due to lower exploration activities and natural decline in fields, whereas higher demand has made the product scant, experts said in a report.

The coalfield in Sindh province has huge coal resources of 175 billion tons. Due to import of high cost energy resources, government has decided to enhance the share of coal in the overall energy mix from 5 percent to 18 percent up to 2018. Almost 80 percent of cement industry has now switched over to indigenous coal from furnace oil that has saved considerable foreign exchange which was being spent on the import of furnace oil. The conversion of all cement industry to coal would generate demand for 2.5 million tons of coal per annum by 2010. In view of anticipated shortfall of electricity and other energy resources during the next 10 years the maximum utilization of the indigenous coal would be required in power generation and gasification.

According to experts, the total gas supplies during FY11 remained at 30.7 million toe (measured in terms of Tones Of Oil Equivalent) with a decline of 0.4 per cent over FY10 supplies of 30.8 million toe.

Another point of concern is declining share of coal as a source of energy. The share of coal declined to 6.7 per cent from the peak of 9.2 per cent in FY08. The total supply remained 4.35 million toe with a decline of 6 per cent from 4.6 million toe in FY10.

Though the energy supplies recovered during FY11 after subdued growth in FY10, the source of energy was seen skewing towards more expensive imported crude oil. On the contrary cheaper sources like natural gas and coal were seen persistently declining in energy mix of Pakistan. Furqan Punjani, an energy expert, said that healthy recovery was seen in hydro electricity generation after persistent decline in last 3 years on account of water availability amid floods. Resultantly, the total primary energy supplies in outgoing fiscal year increased to 64.5 million toe i.e. 2.2 per cent higher from FY10 cumulative supplies of 63 million toe, as per the latest Pakistan Energy Year Book 2011.

Although country’s energy requirement was addressed by higher use of oil as a source of energy, it has also exposed the country to volatile commodity prices. With 0.8 million toe increase in usage of oil to 20.6 million toe in FY11, oil primarily contributed to the growth of energy usage. More so this has further augmented the weight of oil in energy supply to 32 per cent from 28 per cent in FY06; however this was still lower than 43.5 per cent share witnessed in FY01.

With growing fuel oil requirements primarily from power generation, we believe the share of oil would continue to remain on these levels in medium term. Moreover subdued growth in gas production activities and already higher demand from non switchable sectors (fertilizer and textile) further backs this assumption.

During FY11, the share of hydro electricity in the energy mix improved by healthy120bps to 11.8 per cent compared to 10.6 per cent in FY10. This trend has been reversed after 3 years as the share started falling from FY08. The hydro energy supply increased by healthy 13 per cent to 7.6 million toe over 6.7 million toe last year. This improvement was primarily seen on account of higher water availability post historic floods in the beginning of FY11 which we believe would decline in FY12.

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